What is the difference between a secured card and prepaid card?

A secured card functions almost identically to a standard revolving credit card account. The primary difference is that the credit limit is tied to your savings account balance. To open a secured account you must deposit a specified amount of cash into a savings account. Your credit limit is a portion of the balance in that account. If you fail to pay the charges you make, the bank can withdraw funds from the savings account. That’s why it is called a secured card. The savings account balance is security against you failing to repay the charges you make.

A secured card can be reported to Experian and other credit reporting companies and becomes part of your credit report; therefore, it can help you to build your credit history.

A prepaid card is a cash card, not a credit card. Prepaid cards work similar to a debit card in that cash is loaded onto a card. You can use that card and access the cash until the account balance is spent. At that point, you’ll need to re-load the card by depositing more money. Essentially, a prepaid card is a substitute for using cash. Prepaid cards are not reported to the national credit reporting companies and do not help you build credit.

Check out the scope to hear answers to all the questions asked:

Do you have questions about credit?

Join our live video chat every Tuesday and Thursday at 2:30 p.m. ET on Periscope. Rod Griffin, Director of Public Education at Experian, is available to answer your questions live.

The information contained in Ask Experian is for educational purposes only and is not legal advice. You should consult your own attorney or seek specific advice from a legal professional regarding your particular situation. Please understand that Experian policies change over time. Posts reflect Experian policy at the time of writing. While maintained for your information, archived posts may not reflect current Experian policy. The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team will include it in a future post.